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An Analysis of Tourism Contribution to Economic Growth in SADC Countries

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An Analysis of Tourism Contribution to Economic Growth in SADC Countries An analysis of tourism contribution to economic growth in SADC Countries Albert Makochekanwa *8* Abstract The study how the tourism sector can be an engine of economic growth in SADC member countries. The paper found the contribution of tourism to GDP, employment, export receipts and investment is significant. Although this sector’s contribution to the economy varies among SADC countries, the the study found that Seychelles and Mauritius rely heavily on tourism vis-à-vis its contribution to GDP, employment, export earnings and investment. In both Seychelles and Mauritius, tourism sector contributes about 50% and 30% to GDP; 60% and 28% to total employment; approximately 35% and 34% to export receipts; and 38% and 10% as percentage of GDP; respectively. Empirical evidence confirmed the importance of tourism to economic activities in SADC region, with a 1% increase in tourism receipt causing a 0.16% rise in GDP per capita. Similarly, a 1% rise in tourism related investment resulted in a 0.29% increase in GDP per capita. Keywords: Tourism, export receipts, SADC Member Countries, Economic growth JEL classification: L83 * Lecturer: Department of Economics, University of Zimbabwe, [email protected] 42 BOJE: Botswana Journal of Economics Introduction Tourism9 development is increasingly viewed as an important tool in promoting economic growth, alleviating poverty, and advancing food security (Richardson, 2012). A number of studies including United Nations World Travel Organization (UNWTO, 2002) have shown that tourism can play a significant role towards balanced sustainable development, and that it can be effectively harnessed to generate net benefits for the poor. The potential of the tourism sector as a development tool to positively contribute to economic growth and poverty reduction emanates from its several peculiar characteristics (UNWTO, 2002) including the following: (i) the industry represents an opportunity for economic diversification, (ii) tourism is the only export sector where the consumer travels to the exporting country thus providing opportunities for the poor to become exporters through the sale of goods and services to foreign tourists, (iii) the sector is labour-intensive and supports a diverse and versatile labour market; and (iv) finally, there are numerous indirect benefits of tourism for the poor. Overall, statistical figures from the World Council of Travel and Tourism (WTTC) database shows that the average contribution of tourism sector to gross domestic product (GDP) of the Southern African Development Community (SADC) at regional level is around eight percent annual, with the contribution rising to 50% and 30% in the case of Seychelles, and Mauritius, respectively. The same shares (50% and 30%) are also accounted by the sector in terms of formal employment in the latter two countries. Despite tourism’s increasing importance in SADC economies, the sector has however attracted relatively limited attention in terms of scholarly research. Thus, this lack of research of the impact of tourism on economic growth in the SADC region is the major motivation of this study. Given the above brief background, the main objectives of this study are three-fold. First, the paper provides an account of the contribution of tourism sector to the economies of the Southern Africa Development Community (SADC)10. The contributions are categorized into four areas namely to GDP, employment, exports earnings and capital investment. Second, the study empirically investigates the contribution of tourism industry to the economy. Third and lastly, the research recommends possible strategic initiatives that tourism stakeholders can adopt and implement in an effort to buttress the potential of tourism as an engine for economic growth in the region. The period of analysis is 2000 to 2012 inclusively. Overview of tourism trends in SADC member countries Tourism contributes significantly to GDP, export earning, employment, human and physical capital investment of SADC countries. Global estimates show that tourism has the potential to contribute on average around 12% to a country’s GDP. As will be shown later, the contribution of the tourism sector towards GDP in most SADC countries is above the global average, with the share of tourism in total economic activities being highest in Seychelles (above 50% of GDP) and followed by Mauritius (more than 25% of GDP). 9 Tourism is defined by the UNWTO as a stay of at least one night, but less than a year, away from one’s ‘normal environment’, and thus includes business, conference, and other types of non-leisure travel, but not all forms of leisure or discretionary travel, for example not day trips or retirement to another country. 10 The current SADC Member States are: Angola, Botswana, Democratic Republic of Congo, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe. BOJE: Botswana Journal of Economics 43 Trends in international arrivals The region as a whole has witnessed a 74% growth in terms of international tourist’s arrivals during the past 11 years from 2002 to 2012, where international arrivals rose from 13 million to 22.6 million as presented in Table 1. The top three countries which attracted a large number of tourists are South Africa, Botswana and Zimbabwe, with each of these three countries having received arrivals of more than one million per each year. South Africa however is the major regional destination of international arrivals, with arrivals having increased from the 2002 figure of 4.5 million to more than 9.7 million in 2012. At regional level, the rising trend of tourist arrivals is forecasted to reach 32.2 million by 2022.. Thus the potential of the sector to become an engine for economic growth and development in the region is cemented by this forecasted increase in tourist arrivals. Table 1: International tourist arrivals 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Angola ‘000’ 100 130 200 220 120 200 300 375 420 430 456 % share - 30.0 53.8 10.0 -45.5 66.7 50.0 25.0 12.0 2.4 6.0 Botswana ‘000’ 1400 1500 1600 1500 1400 1800 2100 2100 2200 2300 2374 % share - 7.1 6.7 -6.3 -6.7 28.6 16.7 0.0 4.8 4.5 3.2 Lesotho ‘000’ 130 140 135 130 350 300 290 330 420 370 382 % share - 7.7 -3.6 -3.7 169.2 -14.3 -3.3 13.8 27.3 -11.9 3.2 Madagascar ‘000’ 70 130 230 280 310 350 370 155 180 210 232 % share - 85.7 76.9 21.7 10.7 12.9 5.7 -58.1 16.1 16.7 10.5 Malawi ‘000’ 400 440 445 450 650 750 753 760 755 600 537 % share - 10.0 1.1 1.1 44.4 15.4 0.4 0.9 -0.7 -20.5 -10.5 Mauritius ‘000’ 670 680 700 790 800 900 910 895 910 994 997 % share - 1.5 2.9 12.9 1.3 12.5 1.1 -1.6 1.7 9.2 0.3 Mozambique ‘000’ 600 500 600 650 700 800 1900 2300 1600 1700 1811 % share - -16.7 20.0 8.3 7.7 14.3 137.5 21.1 -30.4 6.3 6.5 Namibia ‘000’ 600 650 700 750 810 900 810 710 800 850 1106 % share - 8.3 7.7 7.1 8.0 11.1 -10.0 -12.3 12.7 6.3 30.1 Seychelles ‘000’ 130 125 125 130 140 170 165 160 175 195 188 % share - -3.8 0.0 4.0 7.7 21.4 -2.9 -3.0 9.4 11.4 -3.6 South Africa ‘000’ 4500 4500 4550 5000 6000 6900 7000 7100 8200 8300 9718 % share - 0.0 1.1 9.9 20.0 15.0 1.4 1.4 15.5 1.2 17.1 Swaziland ‘000’ 250 450 450 840 880 880 750 900 880 875 795 % share - 80.0 0.0 86.7 4.8 0.0 -14.8 20.0 -2.2 -0.6 -9.1 Tanzania ‘000’ 530 530 580 600 610 700 740 710 800 865 872 % share - 0.0 9.4 3.4 1.7 14.8 5.7 -4.1 12.7 8.1 0.8 Zambia ‘000’ 590 400 550 680 770 890 800 720 810 860 895 % share - -32.2 37.5 23.6 13.2 15.6 -10.1 -10.0 12.5 6.2 4.1 Zimbabwe ‘000’ 2000 2200 1700 1500 2115 2250 1800 1850 2100 2200 2258 % share - 10.0 -22.7 -11.8 41.0 6.4 -20.0 2.8 13.5 4.8 2.6 SADC (mn) ‘000’ 13 13.5 14 14.5 15 17 18 19 20 21 22.6 % share - 3.8 3.7 3.6 3.4 13.3 5.9 5.6 5.3 5.0 7.6 Source: WTTC database 44 BOJE: Botswana Journal of Economics Tourism contribution to GDP Table 2 provides a 13-years trend of tourism’s contribution to SADC economies as measured by contribution to gross domestic product (GDP). Overall, the average contribution of tourism to GDP at regional level is around eight percent. In value terms, the sector contributed a total US$54.2 billion in 2011 and US$56.6 billion in 2012 and is forecasted to add US$89.8 billion by 2022 to regional GDP. Thus an increase of around 58.7% is expected in terms of value contribution of tourism between 2012 and 2022 to SADC economic activities. At country level, although the contribution in most countries in terms of percentage share to GDP is relatively low, two countries stand to be mentioned. Seychelles and Mauritius are the two countries where tourism is contributing well above the global average showing the sector’s importance to the economies of these countries.
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